Niña Jewelry Manufacturing of Metal Arts, Inc. v. Montecillo, G.R. No.
Jewelry imposed a policy for goldsmiths requiring them to post cash bonds
188169, November 28, 2011, Reyes, J
______________________________________________
Petitioner: NIÑA JEWELRY MANUFACTURING OF METAL ARTS, INC.
(otherwise known as NIÑA MANUFACTURING AND METAL ARTS, INC.) and
ELISEA B. ABELLA
Respondent: MADELINE C. MONTECILLO and LIZA M. TRINIDAD
Doctrine:
The Labor Code of the Philippines provides: ART. 113. Wage Deduction. —
No employer, in his own behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer,
and the deduction is to recompense the employer for the amount paid by
him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to
check-off has been recognized by the employer or authorized in writing by
the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued
by the Secretary of Labor.
Article 114. Deposits for loss or damage. — No employer shall require his
worker to make deposits from which deductions shall be made for the
reimbursement of loss of or damage to tools, materials, or equipment
supplied by the employer, except when the employer is engaged in such
trades, occupations or business where the practice of making deposits is a
recognized one, or is necessary or desirable as determined by the Secretary
of Labor in appropriate rules and regulations.
______________________________________________
Facts:
Madeline Montecillo (Madeline) and Liza Trinidad (Liza),
hereinafter referred to collectively as the respondents, were first employed
as goldsmiths by the petitioner Niña Jewelry Manufacturing of Metal Arts,
Inc. (Niña Jewelry) in 1996 and 1994, respectively. Madeline's weekly rate
was P1,500.00 while Liza's was P2,500.00. Petitioner Elisea Abella (Elisea) is
Niña Jewelry's president and general manager. There were incidents of theft
involving goldsmiths in Niña Jewelry's employ On August 13, 2004, Niña
or deposits in varying amounts but in no case exceeding 15% of the latter's
salaries per week. The deposits were intended to answer for any loss or
damage which Niña Jewelry may sustain by reason of the goldsmiths' fault
or negligence in handling the gold entrusted to them. The deposits shall be
returned upon completion of the goldsmiths' work and after an accounting
of the gold received. Niña Jewelry alleged that the goldsmiths were given
the option not to post deposits, but to sign authorizations allowing the
former to deduct from the latter's salaries amounts not exceeding 15% of
their take home pay should it be found that they lost the gold entrusted to
them. The respondents claimed otherwise insisting that Niña Jewelry left
the goldsmiths with no option but to post the deposits. The respondents
alleged that they were constructively dismissed by Niña Jewelry as their
continued employments were made dependent on their readiness to post
the required deposits.
Labor Arbiter Jose Gutierrez (LA Gutierrez) dismissed the
respondents' complaints for lack of merit but ordered Niña Jewelry to pay
Madeline the sum of P3,750.00, and Liza, P6,250.00, representing their
proportionate entitlements to 13th month pay for the year 2004.
NLRC which affirmed LA Gutierrez's dismissal of the amended
complaints but deleted the award of 13th month pay based on findings that
the former had contracted unpaid individual loans from Niña Jewelry.
CA ascribing patent errors in the appreciation of facts and
application of jurisprudence on the part of the NLRC when it ruled that what
occurred was not a case of illegal dismissal but of abandonment of work.
Issue: Whether the imposition of deposit is proper and valid. No
Held:
The petitioners did not whimsically or arbitrarily impose the policy
to post cash bonds or make deductions from the workers' salaries. As
attested to by the respondents' fellow goldsmiths in their Joint Affidavit, the
workers were convened and informed of the reason behind the
implementation of the new policy. Instead of airing their concerns, the
respondents just promptly stopped reporting for work.
Although the propriety of requiring cash bonds seems doubtful for
reasons to be discussed hereunder, we find no grounds to hold that the
respondents were dismissed expressly or even constructively by the
petitioners. It was the respondents who merely stopped reporting for work.
While it is conceded that the new policy will impose an additional burden
on the part of the respondents, it was not intended to result in their
demotion. Neither is a diminution in pay intended because as long as the
workers observe due diligence in the performance of their tasks, no loss or
damage shall result from their handling of the gold entrusted to them,
hence, all the amounts due to the goldsmiths shall still be paid in full.
Further, the imposition of the new policy cannot be viewed as an act
tantamount to discrimination, insensibility or disdain against the
respondents. For one, the policy was intended to be implemented upon all
the goldsmiths in Niña Jewelry's employ and not solely upon the
respondents. Besides, as stressed by the petitioners, the new policy was
intended to merely curb the incidences of gold theft in the work place. The
new policy can hardly be said to be disdainful or insensible to the workers
as to render their continued employment unreasonable, unlikely or
impossible.
On September 7, 2004, or more or less three weeks after the
imposition of the new policy, the respondents filed their complaints for
illegal dismissal which include their prayer for the payment of separation
pay. On September 20, 2004, they filed amended complaints seeking for
reinstatement instead. The CA favored the respondents' argument that the
latter could not have abandoned their work as it can be presumed that they
would not have filed complaints for illegal dismissal had they not been really
terminated and had they not intended themselves to be reinstated. We find
that the presumption relied upon by the CA pales in comparison to the
substantial evidence offered by the petitioners that it was the respondents
who stopped reporting for work and were not dismissed at all.
In sum, we agree with the petitioners that substantial evidence
support the LA's and the NLRC's findings that no dismissal occurred. Hence,
the CA should not have given due course to and granted the petition for
certiorari under Rule 65 filed by the respondents before it.
In view of our disquisition above that the findings of the LA and the
NLRC that no constructive dismissal occurred are supported by substantial
evidence, the CA thus erred in giving due course to and granting the petition
filed before it. Hence, it is not even necessary anymore to resolve the issue
of whether or not the policy of posting cash bonds or making deductions
from the goldsmiths' salaries is proper. However, considering that there are
other goldsmiths in Niña Jewelry's employ upon whom the policy challenged
by the respondents remain to be enforced, in the interest of justice and to
put things to rest, we shall resolve the issue.
Article 113 of the Labor Code is clear that there are only three
exceptions to the general rule that no deductions from the employees'
salaries can be made. The exception which finds application in the instant
petition is in cases where the employer is authorized by law or regulations
issued by the Secretary of Labor to effect the deductions. On the other hand,
Article 114 states that generally, deposits for loss or damages are not
allowed except in cases where the employer is engaged in such trades,
occupations or business where the practice of making deposits is a
recognized one, or is necessary or desirable as determined by the Secretary
of Labor in appropriate rules or regulations. While employers should
generally be given leeways in their exercise of management prerogatives,
we agree with the respondents and the CA that in the case at bar, the
petitioners had failed to prove that their imposition of the new policy upon
the goldsmiths under Niña Jewelry's employ falls under the exceptions
specified in Articles 113 and 114 of the Labor Code.
Articles 113 and 114 of the Labor Code are clear as to what are the
exceptions to the general prohibition against requiring deposits and
effecting deductions from the employees' salaries. Hence, a statutory
construction of the aforecited provisions is not called for. Even if we were
however called upon to interpret the provisions, our inclination would still
be to strictly construe the same against the employer because evidently, the
posting of cash bonds and the making of deductions from the wages would
inarguably impose an additional burden upon the employees.
While the petitioners are not absolutely precluded from imposing
the new policy, they can only do so upon compliance with the requirements
of the law. In other words, the petitioners should first establish that the
making of deductions from the salaries is authorized by law, or regulations
issued by the Secretary of Labor. Further, the posting of cash bonds should
be proven as a recognized practice in the jewelry manufacturing business,
or alternatively, the petitioners should seek for the determination by the
Secretary of Labor through the issuance of appropriate rules and regulations
that the policy the former seeks to implement is necessary or desirable in
the conduct of business. The petitioners failed in this respect. It bears
stressing that without proofs that requiring deposits and effecting
deductions are recognized practices, or without securing the Secretary of
Labor's determination of the necessity or desirability of the same, the
imposition of new policies relative to deductions and deposits can be made
subject to abuse by the employers. This is not what the law intends.
In view of the foregoing, we hold that no dismissal, constructive or
otherwise, occurred. The findings of the NLRC and the LA that it was the
respondents who stopped reporting for work are supported by substantial
evidence. Hence, the CA erred when it re-evaluated the parties' respective
evidence and granted the petition 􀁄led before it. However, we agree with
the CA that it is baseless for Niña Jewelry to impose its new policy upon the
goldsmiths under its employ without first complying with the strict
requirements of the law.
WHEREFORE, the instant petition is PARTIALLY GRANTED . The
assailed Decision and Resolution of the CA dated January 9, 2009 and May
26, 2009, respectively, are REVERSED only in so far as they declared that the
respondents were constructively dismissed and entitled to reinstatement
and payment of backwages, allowances and benefits. However, the CA's
ruling that the petitioners' imposition of its new policy upon the
respondents lacks legal basis, stands. SO ORDERED.

Balladares v. Peak Ventures Corp., G.R. No. 161794, June 16, 2009,
Nachura, J

______________________________________________
Petitioner: NESTOR J. BALLADARES, ROLDAN L. GUANIZO, ARNULFO E.
MERTO, GERONIMO G. GOBUYAN, EDGARDO O. AVILA, and EDUARD F.
RAMOS, JR.
Respondent: PEAK VENTURES CORPORATION/EL TIGRE SECURITY AND
INVESTIGATION AGENCY and YANGCO MARKET OWNERS
ASSOCIATION/LAO TI SIOK BEE
Doctrine:
ART. 129. Recovery of wages, simple money claims and other benefits. —
Upon complaint of any interested party, the regional director of the
Department of Labor and Employment or any of the duly authorized hearing
officers of the Department is empowered, through summary proceeding
and after due notice, to hear and decide any matter involving the recovery
of wages and other monetary claims and benefits, including legal interest,
owing to an employee or person employed in domestic or household service
or househelper under this Code, arising from employer-employee relations:
Provided, That such complaint does not include a claim for reinstatement:
Provided further, That the aggregate money claims of each employee or
househelper do not exceed five thousand pesos (P5,000.00).
______________________________________________
Facts:
Petitioners Nestor J. Balladares, Roldan L. Guanizo, Arnulfo E.
Merto, Geronimo G. Gobuyan, Edgardo O. Avila, and Eduard F. Ramos, Jr.
were employed by respondent Peak Ventures Corporation/El Tigre Security
and Investigation Agency (Peak Ventures) as security guards and were
assigned at the premises of respondent Yangco Market Owners and
Administrators Association (YMOAA). They filed a complaint for
underpayment of wages against their employer, Peak Ventures, with the
Department of Labor and Employment (DOLE). Acting on the complaint,
DOLE conducted an inspection of Peak Ventures on March 4, 1999, and the
following violations were noted: (1) underpayment of the minimum wage
and other auxiliary benefits; (2) pertinent employment records (payrolls,
daily time records, contract of employment) were not available at the time
of inspection.
A Notice of Inspection Result was issued to and received by the
Human Resource Department Manager, Ms. Cristina Q. Villacrusis. Peak
Ventures was instructed to effect restitution and/or to file its objections
within five (5) working days from receipt thereof.
Respondent failed to correct the violations or contest the findings
as required; hence, the parties were summoned for hearing. During the
scheduled hearing on March 26, 1999, both complainants and Peak
Ventures moved to implead its client, YMOAA, represented by its President,
Ms. Lao Ti Siok Bee, as party respondent. YMOAA opposed on the ground
that it was not the employer of petitioners. On May 25, 1999, Peak Ventures
filed a Third Party Complaint and/or Position Paper with leave of court,
alleging that Peak Ventures was entitled to indemnity or subrogation from
YMOAA in respect to the monetary claims of petitioners, because the cause
of the underpayment
of wages, if any, arose from the failure of the YMOAA to pay the security
agency the correct amount due petitioners as prescribed by various Wage
Orders.
In the Order dated July 21, 1999, Regional Director Maximo
Baguyot Lim rendered judgment in favor of petitioners and ruled that the
contractor was jointly and severally liable with the principal.
Respondent appealed the Order to the Office of the Secretary of
Labor positing that the Regional Director committed serious errors in
awarding the amount of P1,106,298.00 to petitioners, which it alleged to be
quite excessive. On December 7, 2000, respondent's appeal was dismissed
respondent Peak Ventures elevated the case to the CA, alleging that public
respondent Secretary of DOLE acted without, or in excess of, jurisdiction or
with grave abuse of discretion.
The CA granted the petition, ruling that the Regional Director had
no jurisdiction to hear and decide the case, because the claims of each of
the petitioners exceeded P5,000.00, and the power to adjudicate such
claims belonged to the Labor Arbiter.
The appellate court ratiocinated that this exclusive jurisdiction of
the Labor Arbiters was confirmed by Article 129 of the Labor Code, which
excludes from the jurisdiction of the Regional Directors or any hearing
officer of the DOLE the power to hear and decide claims of employees
arising from employer-employee relations exceeding the amount of
P5,000.00 for each employee.
Issue: Whether DOLE’s Regional Director has jurisdiction over the case. Yes
Held: We uphold the jurisdiction of the DOLE Regional Director.
It should be noted that petitioners' complaint involved
underpayment of wages and other benefits. In order to verify the allegations
in the complaint, DOLE conducted an inspection, which yielded proof of
violations of labor standards. By the nature of the complaint and from the
result of the inspection, the authority of the DOLE, under Article 128, came
into play regardless of the monetary value of the claims involved. The extent
of this authority and the powers flowing therefrom are defined and set forth
in Article 128 of the Labor Code, as amended by R.A. No. 7730, the pertinent
portions of which read as follows:
ART. 128. Visitorial and enforcement power. — (a) The Secretary of
Labor or his duly authorized representatives, including labor regulation
officers, shall have access to employer's records and premises at any time
of the day or night whenever work is being undertaken therein, and the right
to copy therefrom, to question any employee and investigate any fact,
condition or matter which may be necessary to determine violations or
which may aid in the enforcement of this Code and of any labor law, wage
order or rules and regulations issued pursuant thereto.
(b) Notwithstanding the provisions of Articles 129 and 217 of this
Code to the contrary, and in cases where the relationship of employer-
employee still exists, the Secretary of Labor and Employment or his duly
authorized representatives shall have the power to issue compliance orders
to give effect to the labor standards provisions of this Code and other labor
legislation based on the findings of labor employment and enforcement
officers or industrial safety engineers made in the course of inspection. The
Secretary or his duly authorized representatives shall issue writs of
execution to the appropriate authority for the enforcement of their orders,
except in cases where the employer contests the finding of the labor
employment and enforcement officer and raises issues supported by
documentary proofs which were not considered in the course of inspection.
An order issued by the duly authorized representative of the
Secretary of Labor and Employment under this article may be appealed to
the latter. In case said order involves a monetary award, an appeal by the
employer may be perfected only upon the posting of a cash or surety bond
issued by a reputable bonding company duly accredited by the Secretary of
Labor and Employment in the amount equivalent to the monetary award in
the order appealed from. This Court has held in a plethora of cases that
reliance on the Servando ruling is no longer tenable in view of the
enactment of R.A. No. 7730, amending Article 128 (b) of the Labor Code. The
Secretary of Labor or his duly authorized representatives is now empowered
to hear and decide, in a summary proceeding, any matter involving the
recovery of any amount of wages and other monetary claims arising out of
employer-employee relations at the time of the inspection, even if the
amount of the money claim exceeds P5,000.00.
However, if the labor standards case is covered by the exception
clause in Article 128 (b) of the Labor Code, then the Regional Director will
have to endorse the case to the appropriate Arbitration Branch of the NLRC.
In order to divest the Regional Director or his representatives of jurisdiction,
the following elements must be present: (a) that the employer contests the
findings of the labor regulations officer and raises issues thereon; (b) that in
order to resolve such issues, there is a need to examine evidentiary matters;
and (c) that such matters are not verifiable in the normal course of
inspection. The rules also provide that the employer shall raise such
objections during the hearing of the case or at any time after receipt of the
notice of inspection results.
In this case, the Regional Director validly assumed jurisdiction over
the money claims of private respondents even if the claims exceeded P5,000
because such jurisdiction was exercised in accordance with Article 128(b) of
the Labor Code and the case does not fall under the exception clause. It
bears stressing that this petition clearly involves a labor standards case, and
it is in keeping with the law that "the worker need not litigate to get what
legally belongs to him, for the whole enforcement machinery of the DOLE
exists to insure its expeditious delivery to him free of charge." We,
therefore, sustain the jurisdiction of the DOLE Regional Director in this case.
WHEREFORE, the petition is GRANTED. The Decision of the Court of
Appeals dated September 16, 2003 is REVERSED and SET ASIDE. The decision
of the Secretary of Labor is REINSTATED. SO ORDERED.
Songco v. NLRC, G.R. Nos. 50999-51000. March 23, 1990, MEDIALDEA, J
______________________________________________

Petitioners: JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL
Respondents: NATIONAL LABOR RELATIONS COMMISSION (FIRST
DIVISION), LABOR ARBITER FLAVIO AGUAS, and F.E. ZUELLIG (M), INC.
Doctrine: Underlined in ruling.
Facts:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as
Zuellig) filed with the Department of Labor (Regional Office No. 4) an
application seeking clearance to terminate the services of petitioners Jose
Songco, Romeo Cipres, and Amancio Manuel (hereinafter referred to as
petitioners) allegedly on the ground of retrenchment due to financial losses.
This application was seasonably opposed by petitioners alleging that the
company is not suffering from any losses. They alleged further that they are
being dismissed because of their membership in the union. At the last
hearing of the case, however, petitioners manifested that they are no longer
contesting their dismissal. The parties then agreed that the sole issue to be
resolved is the basis of the separation pay due to petitioners. Petitioners,
who were in the sales force of Zuellig received monthly salaries of at least
P400.00. In addition, they received commissions for every sale they made.
The Collective Bargaining Agreement entered into between Zuellig
and F.E. Zuellig Employees Association, of which petitioners are members,
contains the following provision: "ARTICLE XIV — Retirement Gratuity.
"Section 1(a) — Any employee, who is separated from employment due to
old age, sickness, death or permanent lay-off not due to the fault of said
employee shall receive from the company a retirement gratuity in an
amount equivalent to one (1) month's salary per year of service. One month
of salary as used in this paragraph shall be deemed equivalent to the salary
at date of retirement; years of service shall be deemed equivalent to total
service credits, a fraction of at least six months being considered one year,
including probationary employment.
On the other hand, Article 284 of the Labor Code then prevailing
provides: "Art. 284. Reduction of personnel. — The termination of
employment of any employee due to the installation of labor saving-devices,
redundancy, retrenchment to prevent losses, and other similar causes, shall
entitle the employee affected thereby to separation pay. In case of
termination due to the installation of labor-saving devices or redundancy,
the separation pay shall be equivalent to one (1) month pay or to at least
one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and other similar causes, the separation pay
shall be equivalent to one (1) month pay or at least one-half (1/2) month
pay for every year of service, whichever is higher. A fraction of at least six
(6) months shall be considered one (1) whole year."
In addition, Sections 9 (b) and 10, Rule 1, Book VI of the Rules
Implementing the Labor Code provide: "Sec. 9(b). Where the termination of
employment is due to retrenchment initiated by the employer to prevent
losses or other similar causes, or where the employee suffers from a disease
and his continued employment is prohibited by law or is prejudicial to his
health or to the health of his co-employees, the employee shall be entitled
to termination pay equivalent at least to his one month salary, or to one-
half month pay for every year of service, whichever is higher, a fraction of
at least six (6) months being considered as one whole year.
"Sec. 10. Basis of termination pay . — The computation of the
termination pay of an employee as provided herein shall be based on his
latest salary rate, unless the same was reduced by the employer to defeat
the intention of the Code, in which case the basis of computation shall be
the rate before its deduction."
Labor Arbiter rendered decision in favor of the petitioner and
ordered the respondent should be as it is hereby, ordered to pay the
complainants separation pay equivalent to their one-month salary
(exclusive of commissions, allowances, etc.) for every year of service that
they have worked with the company. The appeal by petitioners to the
National Labor Relations Commission was dismissed for lack of merit.
Issue: Whether or not earned sales commissions and allowances should be
included in the monthly salary of petitioners for the purpose of computation
of their separation pay. The petition is impressed with merit.
Held:
The ambiguity between Article 97(f), which defines the term 'wage'
and Article XIV of the Collective Bargaining Agreement, Article 284 of the
Labor Code and Sections 9(b) and 10 of the Implementing Rules, which
mention the terms "pay" and "salary", is more apparent than real. Broadly,
the word "salary" means a recompense or consideration made to a person
for his pains or industry in another man's business. Whether it be derived
from "salarium," or more fancifully from "sal," the pay of the Roman soldier,
it carries with it the fundamental idea of compensation for services
rendered. Indeed, there is eminent authority for holding that the words
"wages" and "salary" are in essence synonymous . "Salary," the etymology
of which is the Latin word "salarium," is often used interchangeably with
"wage", the etymology of which is the Middle English word "wagen". Both
words generally refer to one and the same meaning, that is, a reward or
recompense for services performed. Likewise, "pay" is the synonym of
"wages" and "salary" (Black's Law Dictionary, 5th Ed.). Inasmuch as the
words "wages", "pay" and "salary" have the same meaning, and commission
is included in the definition of "wage", the logical conclusion, therefore, is,
in the computation of the separation pay of petitioners, their salary base
should include also their earned sales commissions.
The aforequoted provisions are not the only consideration for
deciding the petition in favor of the petitioners. We agree with the Solicitor
General that granting, in gratia argumenti, that the commissions were in the
form of incentives or encouragement, so that the petitioners would be
inspired to put a little more industry on the jobs particularly assigned to
them, still these commissions are direct remunerations for services
rendered which contributed to the increase of income of Zuellig.
Commission is the recompense, compensation or reward of an agent,
salesman, executor, trustees, receiver, factor, broker or bailee, when the
same is calculated as a percentage on the amount of his transactions or on
the profit to the principal. The nature of the work of a salesman and the
reason for such type of remuneration for services rendered demonstrate
clearly that commissions are part of petitioners' wage or salary. We take
judicial notice of the fact that some salesmen do not receive any basic salary
but depend on commissions and allowances or commissions alone, although
an employer-employee relationship exists. Bearing in mind the preceding
discussions, if We adopt the opposite view that commissions do not form
part of wage or salary, then, in effect, we will be saying that this kind of
salesmen do not receive any salary and therefore, not entitled to separation
pay in the event of discharge from employment. Will this not be absurd?
This narrow interpretation is not in accord with the liberal spirit of our labor
laws and considering the purpose of separation pay which is, to alleviate the
difficulties which confront a dismissed employee thrown to the streets to
face the harsh necessities of life.
Additionally, in Soriano v. NLRC, et al. , supra, in resolving the issue
of the salary base that should be used in computing the separation pay, We
held that:.
"The commissions also claimed by petitioner ('override
commission' plus 'net deposit incentive') are not properly includible in such
base figure since such commissions must be earned by actual market
transactions attributable to petitioner."
Applying this by analogy, since the commissions in the present case
were earned by actual market transactions attributable to petitioners, these
should be included in their separation pay. In the computation thereof, what
should be taken into account is the average commissions earned during
their last year of employment.
The final consideration is, in carrying out and interpreting the Labor
Code's provisions and its implementing regulations, the workingman's
welfare should be the primordial and paramount consideration. This kind of
interpretation gives meaning and substance to the liberal and
compassionate spirit of the law as provided for in Article 4 of the Labor Code
which states that "all doubts in the implementation and interpretation of
the provisions of the Labor Code including its implementing rules and
regulations shall be resolved in favor of labor" (Abella v. NLRC; Manila
Electric Company v. NLRC, et al), and Article 1702 of the Civil Code which
provides that "in case of doubt, all labor legislation and all labor contracts
shall be construed in favor of the safety and decent living for the laborer.
ACCORDINGLY, the petition is hereby GRANTED. The decision of the
respondent National Labor Relations Commission is MODIFIED by including
allowances and commissions in the separation pay of petitioners Jose
Songco and Amancio Manuel. The case is remanded to the Labor Arbiter for
the proper computation of said separation pay. SO ORDERED.
Eastern Telecomunications Phil. Inc. v. Eastern Telecoms Union, G.R. No.
185665, February 8, 2012, MENDOZA, J
Petitioner: EASTERN TELECOMMUNICATIONS PHILIPPINES, INC.
Respondent: EASTERN TELECOMS EMPLOYEES UNION
Facts:
 Eastern Telecommunications Phils., Inc. (ETPI) is a corporation
engaged in the business of providing telecommunications facilities. Eastern
Telecoms Employees Union (ETEU) is the certified exclusive bargaining agent
of the company’s rank and file employees. It has an existing CBA with the
company to expire in the year 2004 with a Side Agreement signed on
September 3, 2001.
In essence, the labor dispute was a spin-off of the company’s plan
to defer payment of the 2003 14th, 15th and 16th month bonuses
sometime in April 2004. The company’s main ground in postponing the
payment of bonuses is due to allege continuing deterioration of company’s
financial position which started in the year 2000. However, ETPI
while postponing payment of bonuses sometime in April 2004, such
payment would also be subject to availability of funds.
Invoking the Side Agreement of the existing CBA for the period
2001-2004 between ETPI and ETEU, the union strongly opposed the
deferment in payment of the bonuses by filing a preventive mediation
complaint with the NCMB. Later, the company made a sudden turnaround
in its position by declaring that they will no longer pay the bonuses until the
issue is resolved through compulsory arbitration. Thus, ETEU filed a Notice
of Strike on the ground of unfair labor practice for failure of ETPI to pay the
bonuses in gross violation of the economic provision of the existing CBA.
ETPI insists that it is under no legal compulsion to pay 14th, 15th and 16th
month bonuses for the year 2003 and 14th month bonus for the year 2004
contending that they are not part of the demandable wage or salary and
that their grant is conditional based on successful business
performance and the availability of company profits from which to source
the same. To thwart ETEU’s monetary claims, it insists that the distribution
of the subject bonuses falls well within the company’s prerogative, being an
act of pure gratuity and generosity on its part. Thus, it can withhold the
grant thereof especially since it is currently plagued with economic
difficulties and financial losses.
ETPI further avers that the act of giving the subject bonuses
did not ripen into a company practice arguing that it has always been a
contingent one dependent on the realization of profits and, hence, the
workers are not entitled to bonuses if the company does not make profits
for a given year. It asseverates that the 1998 and 2001 CBA Side Agreements
did not contractually afford ETEU a vested property right to a perennial
payment of the bonuses. It opines that the bonus provision in the Side
Agreement allows the giving of benefits only at the time of its execution.
For this reason, it cannot be said that the grant has ripened into a company
practice.
NLRC issued its Resolution dismissing ETEU's complaint and held
that ETPI could not be forced to pay the union members the 14th, 15th and
16th month bonuses for the year 2003 and the 14th month bonus for the
year 2004 inasmuch as the payment of these additional benefits was
basically a management prerogative, being an act of generosity and
munificence on the part of the company and contingent upon the realization
of profits. The NLRC pronounced that ETPI may not be obliged to pay these
extra compensations in view of the substantial decline in its financial
condition. Likewise, the NLRC found that ETPI was not guilty of the ULP
charge elaborating that no sufficient and substantial evidence was adduced
to attribute malice to the company for its refusal to pay the subject bonuses.
Issue: Is ETPI is liable to pay 14th, 15th and 16th month bonuses for the year
2003 and 14th month bonus for the year 2004 to the members of
respondent union?
Held: YES. From a legal point of view, a bonus is a gratuity or act of liberality
of the giver which the recipient has no right to demand as a matter of right.
The grant of a bonus is basically a management prerogative which cannot
be forced upon the employer who may not be obliged to assume the
onerous burden of granting bonuses or other benefits aside from the
employee’s basic salaries or wages.
A bonus, however, becomes a demandable or enforceable
obligation when it is made part of the wage or salary or compensation of
the employee. Particularly instructive is the ruling of the Court in Metro
Transit Organization, Inc. v. NLRC, where it was written:
Whether or not a bonus forms part of wages depends upon the
circumstances and conditions for its payment. If it is additional
compensation which the employer promised and agreed to give without any
conditions imposed for its payment, such as success of business or greater
production or output, then it is part of the wage. But if it is paid only if
profits are realized or if a certain level of productivity is achieved, it cannot
be considered part of the wage. Where it is not payable to all but only to
some employees and only when their labor becomes more efficient or more
productive, it is only an inducement for efficiency, a prize therefore, not a
part of the wage.
In the case at bench, it is indubitable that ETPI and ETEU agreed on
the inclusion of a provision for the grant of 14th, 15th and 16th month
bonuses in the 1998-2001 CBA Side Agreement, as well as in the 2001-2004
CBA Side Agreement, which was signed on September 3, 2001. The
provision, which was similarly worded, states:
Employment-Related Bonuses
The Company confirms that the 14th, 15th and 16th month
bonuses (other than the 13th month pay) are granted. A reading of the
above provision reveals that the same provides for the giving of 14th, 15th
and 16th month bonuses without qualification. The wording of the
provision does not allow any other interpretation. There were no conditions
specified in the CBA Side Agreements for the grant of the benefits contrary
to the claim of ETPI that the same is justified only when there are profits
earned by the company. Terse and clear, the said provision does not state
that the subject bonuses shall be made to depend on the ETPI’s financial
standing or that their payment was contingent upon the realization of
profits. Neither does it state that if the company derives no profits, no
bonuses are to be given to the employees. In fine, the payment of these
bonuses was not related to the profitability of business operations.
The records are also bereft of any showing that the ETPI made it
clear before or during the execution of the Side Agreements that the
bonuses shall be subject to any condition. Indeed, if ETPI and ETEU intended
that the subject bonuses would be dependent on the company
earnings, such intention should have been expressly declared in the Side
Agreements or the bonus provision should have been deleted
altogether. Verily, by virtue of its incorporation in the CBA Side
Agreements, the grant of 14th, 15th and 16th month bonuses has become
more than just an act of generosity on the part of ETPI but a contractual
obligation it has undertaken. Moreover, the continuous conferment of
bonuses by ETPI to the union members from 1998 to 2002 by virtue of the
Side Agreements evidently negates its argument that the giving of the
subject bonuses is a management prerogative.
Granting arguendo that the CBA Side Agreement does not contractually bind
petitioner ETPI to give the subject bonuses, nevertheless, the Court finds
that its act of granting the same has become an established company
practice such that it has virtually become part of the employees’ salary or
wage. A bonus may be granted on equitable consideration when the giving
of such bonus has been the company’s long and regular practice.
In Philippine Appliance Corporation v. CA, it was pronounced:
To be considered a “regular practice,” however, the giving of the
bonus should have been done over a long period of time, and must be
shown to have been consistent and deliberate. The test or rationale of this
rule on long practice requires an indubitable showing that the employer
agreed to continue giving the benefits knowing fully well that said
employees are not covered by the law requiring payment thereof.
The records show that ETPI, aside from complying with the regular
13th month bonus, has been further giving its employees 14th month bonus
every April as well as 15th and 16th month bonuses every December of the
year, without fail, from 1975 to 2002 or for 27 years whether it earned
profits or not. The considerable length of time ETPI has been giving the
special grants to its employees indicates a unilateral and voluntary act on its
part to continue giving said benefits knowing that such act was not required
by law. Accordingly, a company practice in favor of the employees has been
established and the payments made by ETPI pursuant thereto ripened into
benefits enjoyed by the employees.
WHEREFORE, the petition is DENIED. The June 25, 2008 Decision of
the Court of Appeals and its December 12, 2008 Resolution are AFFIRMED.
SO ORDERED.
In case he asks (notes):
1. From the foregoing, ETPI cannot insist on business losses as a basis
for disregarding its undertaking. It is manifestly clear that although
it incurred business losses in the year 2000, it continued to
distribute 14th, 15th and 16th month bonuses for said year.
Notwithstanding such huge losses, ETPI entered into the 2001-
2004 CBA Side Agreement on September 3, 2001 whereby it
contracted to grant the subject bonuses to ETEU in no uncertain
terms. ETPI continued to sustain losses for the succeeding years of
2001 and 2002. Still and all, this did not deter it from honoring the
bonus provision in the Side Agreement as it continued to give the
subject bonuses to each of the union members in 2001 and 2002
despite its alleged precarious financial condition. Parenthetically, it
must be emphasized that ETPI even agreed to the payment of the
14th, 15th and 16th month bonuses for 2003 although it opted to
 defer the actual grant in April 2004. All given, business losses
could not be cited as grounds for ETPI to repudiate its obligation
under the 2001-2004 CBA Side Agreement.
2. The Court finds no merit in ETPI’s contention that the bonus
provision confirms the grant of the subject bonuses only on a single
instance because if this is so, the parties should have included such
limitation in the agreement. Nowhere in the Side Agreement does
it say that the subject bonuses shall be conferred once during the
year the Side Agreement was signed.
3. The giving of the subject bonuses cannot be peremptorily
withdrawn by ETPI without violating Article 100 of the Labor Code:
Art. 100. Prohibition against elimination or diminution of benefits. – Nothing
in this Book shall be construed to eliminate or in any way diminish
supplements, or other employee benefits being enjoyed at the time of
promulgation of this Code.
The rule is settled that any benefit and supplement being enjoyed by the
employees cannot be reduced, diminished, discontinued or eliminated by
the employer. The principle of non-diminution of benefits is founded on the
constitutional mandate to protect the rights of workers and to promote
their welfare and to afford labor full protection.